On June 28, 2024, the U.S. Supreme Court (SCOTUS) issued its ruling on Loper-Bright Enterprises (a fisheries company) concerning the Magnuson-Stevens Fishery Conservation and Management Act (MSA). The regulation of fishing boats has potentially vast implications for the chemical industry. The Loper-Bright Enterprises fishing industry group challenged the MSA’s requirement that fisheries hire and pay for inspectors to ensure fishing vessels comply with the MSA.
Since 1984, a SCOTUS decision established a framework for reviewing agency interpretations of a statute “unless it is arbitrary, capricious, or manifestly contrary to the statute.” That framework for interpretation was developed in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. The overall effect of the decision has generally allowed an agency to determine the reasonableness of its actions under the law.
For those unfamiliar with the overall process, Congress passes laws, such as the 1970 Clean Air Act, the 1972 Clean Water Act and the Occupational Safety and Health Act of 1970, to name a few. From these laws, the commissions and agencies established by those laws develop and enforce regulations to interpret the implementation of the laws. It may be a stretch, but in practice, the agencies are put in the position of judge, jury and executioner in judging the actions and behavior of industries and commercial establishments.
When an agency’s regulation or the interpretation of the law was vague or unclear or presented a “regulatory overreach” the affected industry challenged the interpretation. The courts would often defer to the agency’s interpretations of their regulations. Score: Agencies, 1; Industry, 0.
Impact of Loper-Bright Decision
The recent SCOTUS decision on Loper-Bright gives the courts the power to interpret the reasonableness and reduce the ambiguity of existing and new regulations and agency actions (potentially including enforcement decisions and imposition of penalties). This SCOTUS decision will impact many other agency-issued regulations, even potentially including the Federal Communications Commission’s regulations regarding Net Neutrality. This puts the courts in the position of the interpreter of regulatory enforcement. The decision could delay the enforcement of new regulations, and the implications for the Comprehensive Environmental Response and Compensation Act (CERCLA) enforcement and the Toxic Substance Control Act (TSCA) are yet to be determined.
Could CERCLA Be Overturned?
It is unlikely, but within the realm of possibility, that CERCLA, both the law and the enforcement actions, could be overturned based on the court finding that CERCLA is an ex post facto law, a class of laws specifically prohibited by the U.S. Constitution in Article 1, Section 9, Clause 3, and Section 10. Such a law makes a legal act performed legally in the past now illegal and prosecutable in the present.
Why has no one challenged CERCLA? EPA has a leveraged advantage. First is perception. No company or politician wants to bear the public stigma of being against the protection of the environment. Second, bringing such a case before the SCOTUS would be expensive and time-consuming,
CERCLA came into being in 1980, but its application clearly has been against the chemical industry regarding the past disposal practices of waste and off-specification products, even when they were in compliance with the law. A change to existing and potential financial liability for past actions, which were legal at the time, but are illegal and potentially criminal, could prove to be a financial windfall for the chemical and other industries.
In a related issue, The U.S. Chemical Safety and Hazard Investigation Board (CSB) issued a report Number 2024-01-H on Remote Isolation of Process Equipment. The report is 24 pages and discusses significant chemical hazards and incidents involving the release of “highly flammable or toxic materials.” The report also makes specific recommendations to the American Petroleum Institute (API), EPA and OSHA regarding specific changes to their regulations for the purpose of enabling remote isolation of the subject materials. For the API, the CSB report recommends either a new regulation or a new publication changing the wording on the remote activation of isolation equipment by changing the adverb from “should” to “shall,” effectively mandating the installation of equipment to enable the isolation of storage tanks, reactors, towers and all equipment remotely, or at a safe distance from the hazardous incident.
For the EPA, the recommendation (2024-01-H-R2) to modify the Risk Management Program Rule (49 CFR Part 68) to include an evaluation of the need for remote isolation of process equipment and storage tanks by the installation of automatic isolation equipment or by the installation of isolation equipment accessible from a “safe” but remote location away from the hazard.
For OSHA, modification and updating of the Process Safety Management standard by “expanding the Process Hazard Analysis (PHA) requirements under 29 CFR 1910.119(e)(3) to include an evaluation of the need for remote isolation devices for major process equipment that can be remotely activated from a safe location or automatically activated during a release.”
Incurred Costs?
One of the challenges for the named agencies resolves to questions of 1) “What will these modifications cost?” and 2)“Who pays for these modifications?” A lot will depend upon the applicability of the regulations to retrofitting existing facilities. In the case of the API, the proposed modifications may only be applicable for new facilities or those undergoing extensive refitting. For EPA and OSHA, if the regulatory change becomes mandatory, affecting existing facilities, the issue of compliance costs becomes important because it is understood that the cost of equipment modifications to existing facilities required by regulatory changes must be paid for by the agency issuing the regulation.
With the courts now imposing themselves in the review process and limiting the agency’s ability to fiat new equipment or process modifications, we are now entering interesting times.
The ability to isolate tanks and other processing equipment remotely is desirable during an emergency. However, the shutdown and loss of production for retrofitting could have severe consequences for individual facilities. Mandating such retrofitting, resulting in the shutdown of operations could force companies out of business. Without recompense by the mandating entity, such an action could be viewed as an ex post facto action. Designing and installing remote isolation valves during the building of new facilities is a tenable requirement. Installing such equipment during existing facility redesign and rebuild is equally achievable. But all regulators and standard-generating bodies should consider the inadvisability of forcing mandatory change on facilities designed and operated in compliance with the standards in place at the time of their construction.
